In the fast-paced world of electric vehicles (EVs), Tesla has been a trailblazer, capturing imaginations and investor wallets alike. Its meteoric rise has been fueled by a compelling narrative of innovation, disruption, and relentless growth. But lately, cracks have appeared in this once-unstoppable story.
- ‘Shares could fall much further still,’ JPMorgan says.
- About 76% of valuation pinned to future growth, DataTrek finds.
Shockingly low quarterly sales figures from Tesla Inc. this week are raising a fundamental question for investors: If the days of breakneck growth are over, what are the shares of Elon Musk’s company really worth?
The concerns are valid. The number of cars Tesla sold in the first quarter missed Wall Street’s expectations by such a wide margin that it’s worth wondering how much of the electric vehicle giant’s demand problem is baked into the lofty expectations for its revenue and earnings growth over the next few years.
The Shocking Sales Figures
Recently, Tesla reported shockingly low quarterly sales figures that left investors scratching their heads. The number of cars sold in the first quarter fell significantly short of Wall Street’s expectations. This miss raises a fundamental question: Is Tesla’s breakneck growth coming to an end?
The Demand Conundrum
Tesla’s demand problem is now in the spotlight. The lofty expectations for revenue and earnings growth over the next few years are under scrutiny. Investors need convincing that Tesla can return to its strong growth trajectory, fat margins, and highly innovative ways. But right now, the story seems to be one of shrinking demand and a shaky outlook.
Nicholas Colas, co-founder of DataTrek Research, aptly puts it: “There is not a lot of visibility on where Tesla’s next leg of growth will be — whether EVs or its other projects. If you are going to command a premium multiple, you will have to have great earnings visibility or a fantastic story on why those earnings will show up in the future. Tesla has neither at the moment.”
Conclusion
The Tesla growth story, once the darling of Wall Street, is now facing skepticism. Between historically low interest rates, fiscal stimulus during the COVID-19 pandemic, and a shifting landscape, Tesla must navigate uncharted waters. Investors are watching closely, wondering whether the days of breakneck growth are truly over. As the company grapples with its identity, the market awaits answers: What are the shares of Elon Musk’s company really worth?
